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Knowledge Commodities

To understand the difference between commodity products from the industrial and those from the knowledge sector means to understand the main difference between the industrial and the knowledge society – and why Open Source is cutting-edge.

Serving the Mass Market

First of all, when talking about a commodity, I think of a product for the mass market. Many software applications have indeed become commodity products, e.g. a well-known operating system. In respect to Open Source software, being acommodity has been identified as one of three key factors for success.

Quantity or Quality

Software is a knowledge product, when you compare it to industrial commodities, e.g. doormats, is there any difference? The answer is that industrial commodities are physical goods and each new product will take resources to manufacture it. Hence, you always encounter the trade-off between quality and quantity with industrial commodities.

Quite different with software, as this is a virtual product. Software can be copied for almost zero cost, but developing it is a complex and time-consuming task. There’s actually no trade-off between quality and quantity when talking of software commodities and physical goods. The only trade-off concerning knowledge commodities like software is between quality and time.

Copy/Time vs. Optimization/Time

Concerning industrial commodities, there’s a copy-per-time ratio, because the amount of products you can create, is limited by the time it takes to manufacture each product. On the other hand, knowledge commodities have an optimization-per-time ratio. There, you don’t have to invest time to create copies of the product, instead, you can invest your time into making the product better.

Optimizing the Optimization

Due to the optimization-per-time ratio of knowledge commodities, the key to success for a software company is that it optimizes its optimization processes. Knowledge companies have the fear to become mentally lame and not agile enough to compete. In other words: they should take care of their potential to optimize the optimization-per-time ratio.

One measurable example would be more bug fixes in shorter time, but still, this would not say anything about the quality of the patches. High quality expectations need to be a natural part of every knowledge company and its organizational form and company culture needs to support every single employee to live up to these expectations.

Ecosystem of Optimization

Open Source companies and projects provide an open ecosystem to gain maximum optimization of their software commodity products, e.g. by bug fixes and new features contributed by third parties. In proprietary companies, the ecosystem is rather closed and they need to rely on internal resources mostly.

Now, the next question would be, whether the open or the closed ecosystem of optimization is more efficient and competitive? Let’s deal with it in another blog – this one is already long enough.